Tag Archives: Saudi oil production

WikiLeaks: Saudis often warned U.S. about oil speculators in 2008

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Right, they can’t ‘put crude out on the market’ but they can lower the price, a point he cleverly avoids.

WikiLeaks: Saudis often warned U.S. about oil speculators

By Kevin G. Hall

Saudi Oil Minister Ali al Naimi even told U.S. Ambassador Ford Fraker that the kingdom would have difficulty finding customers for the additional crude, according to an account laid out in a confidential State Department cable dated Sept. 28, 2008,

“Saudi Arabia can’t just put crude out on the market,” the cable quotes Naimi as saying. Instead, Naimi suggested, “speculators bore significant responsibility for the sharp increase in oil prices in the last few years,” according to the cable.

What role Wall Street investors play in the high cost of oil is a hotly debated topic in Washington. Despite weak demand, the price of a barrel of crude oil surged more than 25 percent in the past year, reaching a peak of $113 May 2 before falling back to a range of $95 to $100 a barrel.

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Saudi oil production, Donald Trump, and President Obama

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The Saudis operate by posting prices for their refiners and then filling all orders at their posted prices.

It looks like the spike in demand for Saudi crude due to Libya has pretty much passed, and Libya is not back to full production.

So look for Saudi production to fall further when Libya comes back on line.

Prices, however, will remain at whatever level the Saudis decide to post, much like Donald Trump has been proclaiming. And with Trump having the President’s ear, there’s at least an outside chance the President figures it out and lets the Saudis know he’s on to them and works out a price cut?

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Saudi’s oil production down 900k bpd

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Right, this is the second time they’ve said this.

It could all simply be ‘cover’ for lowering prices.

Lots of reasons why they might lower price:

Get it way down and ‘intimidate’ investors in alternatives.

Try to spur demand.

Try to support the world economy and their support their equity holdings.

Members of the royal family and/or other insiders may have established large personal shorts in fwd crude contracts, and now lower price to transfer wealth to their own personal accounts.

Supports any other scheme they may have dreamed up on their flights back and forth to London.

It’s good to be price setter.

Saudi oil minister says market oversupplied and cuts output

By Amena Bakr and Reem Shamseddine

April 17 (Reuters) — Saudi Arabia’s oil minister said on Sunday the market was oversupplied and the kingdom had reduced output, sending a the strongest signal yet that OPEC may not boost output in June to quell soaring oil prices.

Consumers have urged the exporters’ group to add supply to halt the rally in oil prices that has taken crude to its highest level in 2 1/2 years amid unrest in North Africa and the Middle East, but OPEC members say there is little they can do to bring prices down.

“The market is overbalanced … Our production in February was 9.125 million barrels per day (bpd), in March it was 8.292 million bpd. In April we don’t know yet, probably a little higher than March. The reason I gave you these numbers is to show you that the market is oversupplied,” Naimi told reporters.

Two Saudi-based industry sources told Reuters last week the kingdom had cut production.

Naimi’s words, echoed later on Sunday by his counterpart from the United Arab Emirates, are the clearest indications yet that the group is unconvinced there is a need for more oil despite the civil war that has slashed Libyan output and expectations Japanese oil demand will rise as it scrambles to rebuild its earthquake-shattered electricity grid.

“These statements underscore the breadth of the security premium currently in (oil) prices. Overall supplies are sufficient,” said John Kilduff of energy hedge fund Again Capital. “As we’ve seen in the past, however, a well-supplied market is not always a barrier to very high prices.”

NO COMMENT ON PRICE FROM NAIMI

Naimi declined to comment on the current price of crude.
Oil prices fell early last week after Goldman Sachs warned high prices may be eroding demand, but rebounded on signs of renewed health in the U.S. economy on Friday.

Nobuo Tanaka, the head of the International Energy Agency, which represents oil importers’ interests that warned last week high prices were cutting into oil demand, stopped short of saying OPEC needed to boost output, but suggested the group be more flexible in its thinking about supply.

“The market is getting tighter and if it is tighter the price may go up, which may have a negative impact to economic growth,” Tanaka told reporters.

Unrest in North Africa and the Middle East has left Saudi Arabia and other Gulf nations nervous of political unrest. The kingdom has promised nearly $93 billion in handouts to its citizens to keep them happy, making a sharp fall in oil prices a major risk for its budget.

Saudi Arabia and some other OPEC members unilaterally boosted oil production after the March uprising against Libyan leader Muammar Gaddafi shut down the bulk of the North African OPEC member’s oil industry but weak demand for the additional production appears to have prompted the reduction in output.

Naimi said Saudi Arabia had sold 2 million barrels of a special blend of crude that tried to replicate the high quality Libyan barrels lost. Demand for the blend has been tepid, according to oil traders.

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in case there is any doubt about how the price of oil is set

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OPEC (and mainly the Saudis) is the only entity with excess capacity, so it is necessarily price setter. Specifically, they post prices to their refiners and who order all they want at that price. They don’t sell in the spot markets. See highlighted text below. ‘Balancing supply and demand’ is price setting.

The higher prices, particularly in euro, are functioning as a drag on the oil importing economies and also starting to show up in their inflation reports, complicating the decision process of the world’s central bankers. The combination of low aggregate demand and cost push price pressures is always problematic with regards to interest rate policy.

Urals Discount Widens as Russia Boosts Output: Energy Markets

By Christian Schmollinger

May 4 (Bloomberg) — Russian and Mexican oil is trading at growing discounts to U.S. and U.K. crude benchmarks as production by nations outside OPEC reaches a record.

Russia’s Urals for loading in the Mediterranean trades at $2.22 a barrel less than Britain’s Brent crude, compared with a premium of 3 cents a barrel on July 24. The discount between Mexico’s Maya grade and West Texas Intermediate was at $10.82 a barrel on April 30, near the widest in 17 months.

Rising output from Russia and Mexico will push non-OPEC supplies up 1 percent this year to an average 52 million barrels a day, according to the International Energy Agency. At the same time, quota violations among members of the Organization of Petroleum Exporting Countries means global production will increase at a time when the need for oil is diminishing.

“Inventories are growing and non-OPEC supply is expanding and OPEC continues to leak,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “Market bulls should be concerned about the supply overhang.”

The U.S., Mexico, China and Russia have been responsible for most of the growth, boosting output for the past five consecutive quarters, according to an April 27 research note by Barclays Capital. Non-OPEC production reached a record high 49.6 million barrels a day in March, according to data from Energy Intelligence Group.
OPEC Less Needed

The IEA lowered its demand estimate for OPEC, which produces 40 percent of the world’s oil, by 200,000 barrels day to an average of 28.8 million barrels a day to balance supply and demand. The group currently pumps 29.2 million a day, according to Bloomberg data.

OPEC’s spare capacity levels have ballooned to 5.645 million barrels a day in April after falling as low as 2 million in July 2008, when crude hit a record $147.27. The group can produce a total of 34.84 million a day and may add 12 million barrels by 2015 by opening 140 new projects, Secretary- General Abdalla El-Badri said in February.

Russia, the world’s largest oil producer, pumped 10.14 million barrels a day in March, a post-Soviet Union high, according to official data. Mexico exported 1.33 million a day in March, the highest since January 2009, according to data from Petroleos Mexicanos.

U.S. production surged during 2009 and into this year as output returned from post-Hurricane Ike shut-ins in September 2008. The country has pumped an average of 4.482 million barrels a day in the first four months of 2010, up 6.6 percent from the average in 2006 and 2007.

Price Pressure

“If the positive momentum carries into the rest of 2010 and starts filtering through non-OPEC output views for 2011, this could result in a more significant source of downward price pressure along the curve,” said Barclays Capital analyst Costanza Jacazio in the note.

Crude oil for June delivery was at $85.94 a barrel at 10:28 a.m. Singapore time in after-hours electronic trading on the New York Mercantile Exchange, retreating from yesterday’s intraday peak of $87.15, the highest since Oct. 9, 2008.

“The pricing has been driven by the expectations of a tighter market over the long-term and the market has put aside the near-term supply overhang,” said Purvin & Gertz’s Shum.
The non-OPEC “momentum raises the crucial question of whether or not it is sustainable,” said Barclays. “If it fades quickly, as we expect, this will likely have limited implications for oil balances and prices, as OPEC stands in a position to handle a short-term rise in non-OPEC output by simply postponing any further increase in volumes.”

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OPEC April Crude Output Up 25,000 Bbl/Day to 29.19 Mln

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No sign the price hikes are coming from demand pressures.

It’s just the saudis hiking price, thinly masked by the news headlines and passive commodity buyers they use for ‘cover’ so no fingers get pointed in their direction

— Original Sender: NLRT ALERT, BLOOMBERG/ 731 LEXIN —

—– Original Message —–
From: NLRT ALERT (BLOOMBERG/ 731 LEXIN)
At: 4/30 2:21:45

OPEC April Crude Output Up 25,000 Bbl/Day to 29.19 Mln

The attached story matches the criteria for the News Alert named “OPCR”. Type {97 } to view the story on wire BN (BLOOMBERG News).

Your keyword(s) were found in the story’s headline.
————————————————–
OPEC April CRUDE OUTPUT Up 25,000 Bbl/Day to 29.19 Mln

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Natural gas from shale

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[Skip to the end]

Good story.

The key is to replace crude oil which is now largely used for ground transportation.

Pluggable hybrid cars can do the trick if we can get through the next 10 years while they begin to take over.

And natural gas can begin to replace coal for electric power generation needs as suggested below.

Crude has moved from about 70 to about 80 with no increase in demand, as Saudi and OPEC production, a good indicator of actual demand as the Saudis set price to their refiners and let quantity adjust, was relatively flat last month.

So it looks like the Saudis simply changed their prices under cover of investors giving the futures a bid as they moved maybe another $20 billion (from on what I’ve heard) into that asset class during October.

America’s Natural Gas Revolution

By Daniel Yergin and Robert Ineson


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DOEs: Industrial Demand Rises Above 2008

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With any kind of meaningful recovery the saudis will be able to increase price substantially without fear of demand falling off.

Right now they are just setting the hook.
Letting the world economies stabilize and financial markets recover before making their next move, while no conservation efforts of consequence are being put in place by the consumers.

DOEs: Industrial Demand Rises Above 2008!

We have been discussing the industrial demand for oil products as a leading indicator to identify signs for a recovery in Industrial Production. However, we were not as optimistic to think that demand would surge to surpass the prior years’ level of demand in the near-term. We were looking for signs of stabilization. So, this week, we highlight this point that reinforces our belief that U.S. oil demand appears to have bottomed and you should start to see more coincidental indicators of industrial demand.

Broadly speaking, Total Product demand in the U.S. continues to rebound and has risen to 19.287 Mbpd from the trough of 17.697 Mbpd at the end of May ’09. Inventory levels continue to be an overhang and much attention is being paid to stocks at Cushing that remain lofty. However, we are demand focused and see continued and substantial improvement. In addition, year-over-year comparisons will be favorable into the later part of 3Q09.

For Industrial demand for oil products, we use residual, asphalt, propane, propylene, waxes, still gas, etc. We believe that these are “leading” and should be closely watched as the industry goes thru a period of restocking. The next data points we believe investors should see in coming months are increases in power generation and also increases in distillate demand. Both of which are “coincidental” indicators of demand in our opinion.


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